When you’re considering applying for a mortgage, one mortgage approval tip is to pay down your credit cards as much as you can beforehand. The amount of credit card debt you have affects your ability to get approved for a mortgage. You can still get a mortgage even if you have credit card debt, but it depends on how much you owe and how well you’re managing it.
The interest rate you pay on a mortgage and the terms of your loan also matter. If you have a lot of credit card debt, you may not qualify for the best possible rate, which can cost you thousands of dollars in interest over the life of the loan. That’s why it’s best to get a handle on credit card debt before you apply for a mortgage.
Talk to your GoPrime Loan Officer in Asheville to find out how much you qualify for when applying for a mortgage. A knowledgeable loan officer can tell you how much of a difference paying off your credit cards could make for you.
Why Do Credit Cards Affect My Mortgage Approval?
Mortgage lenders consider a variety of factors when deciding on whether to approve your mortgage application. Factors include your employment and credit history and the size of your down payment. Credit card debt can change:
- Your credit score. The percentage of available credit on your credit cards that you’re using is known as credit utilization, which has a big impact on your credit score. If you’re carrying a lot of credit card debt, there’s a good chance your credit utilization is too high.
- Your debt-to-income ratio. One of the ways lenders determine whether you can afford a mortgage is by looking at your debt-to-income ratio, which is calculated based on how much of your monthly gross income is being used for expenses, which includes paying down your debt.
A high debt-to-income ratio may indicate to a lender that you’re overextended. The more credit card debt you have, the more difficulty you may have handling all your monthly bills, including a new mortgage.
How Can I Get the Fastest Mortgage Approval?
If there’s one mortgage approval tip to follow, it’s being proactive with your credit. When you first consider applying for a mortgage, take specific steps that include:
- Using a credit monitoring service to check the balances you’re carrying and how they’re being reported
- Budgeting your money and sticking to your budget
- Avoiding buying new things on credit or applying for new credit
- Considering whether there’s a way you can cut expenses or increase your income so you can pay down your credit cards
- Make sure you pay all your bills on time without exception; a single payment made more than 30 days late can impact your credit score for years to come
Demonstrating that you responsibly handle your finances helps you get the fastest mortgage approval possible and at the best terms for your financial situation. If you’re looking for more mortgage approval tips, contact GoPrime today.